Does The Recent Facebook Scandal Mean The End Of Free?

The second half of March was not a happy time for Facebook. Embroiled in the Cambridge Analytica data scraping scandal, it had to admit that the data of 50 million users had been compromised and issue several grovelling apologies. From 16th-28th March the company’s share price fell from $185 per share to $153.

One of the most revealing parts of Mark Zuckerberg’s testimony to Congress following the scandal, was that the company might consider a paid for, advert free version of the site. He also clearly stated that there would always be a free version of Facebook. Would people embrace paying for Facebook? Would anyone bother? And what does this all mean for the future of digital services?

Remember that very short period at the start of the mobile app revolution when people sold apps rather than gave them away? The race to the bottom was swift, but in many ways the logic was sound. It was impossible to protect your app from copycats, so the logic was to build the number of users swiftly and worry about the business model later. If there was enough data, that would provide the money.

One of the smartest business people I know created an app that is used daily by millions. It is free to download, free to use, has free upgrades and no advertising. The company makes money by selling anonymised data from the app to third parties that use it to be more efficient. Up until the Facebook scandal, this was probably the most popular business model on the Internet.

We naively signed up to Facebook a decade ago to keep in touch with our friends. Social networking was new. We did not know and did not care what our data would be used for. The same could be said of Gmail, Google Maps, LinkedIn and a host of others; sign up, agree to terms and conditions we do not read and off we go!

Perhaps then, people who have had their data abused got what they deserved? What did they expect for nothing? But today we expect more from companies, particularly those that are so integral to people’s lives. Despite being what I would describe as a ‘digital utility’ there is no alternative to Facebook, people either use it or leave.

The perception that everything is free on the internet is finally being challenged. In music and movies, services such as Netflix, Spotify and Amazon Prime involve parting with money. Publishers are trying to work out how to monetise their offerings; from asking for Donations (The Guardian) to restricting access for those that do not pay (The Times and The Telegraph). Granted, The Daily Mail is still relying on advertising, but its online brand is now some distance away from its printed proposition.

The next generation of innovative tech start-ups will choose a business model that does not simply rely on offering free services to harvest data. Increasing public acceptance of subscription models for content, combined with concerns over data privacy, meaning that the perception that everything on the internet will always be free is coming to an end.